Q4 2022 Office Space Report: Tucson, AZ
Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.
Tucson houses several well-known corporations, including Raytheon Technologies Corporation and Intuit Inc., among other large companies.
The unemployment rate in Tucson, AZ reached 3.1% in Q4. The metro area population increased by 1.01% in 2022 to 1,003,000.
At the close of Q4 2022, Tucson’s office space market saw increased vacancies, negative absorption, and a year-over-year decrease in asking rents.
General Area Overview & Demographics
Tucson, Arizona has a diverse demographic makeup, with approximately 53.2% of its population being White, 41.1% Hispanic or Latino, 4.1% Black or African American, 3.8% Asian, and 1.2% Native American or Alaska Native.
Tucson, AZ Median Household Income & Population
The median household income of Tucson, Arizona is $45,837 per year according to the U.S. Census Bureau. Additionally, 8.2% of households earn between $75,000 and $99,999 annually while 6.1% earn between $50,000 and $74,999.
The median age in the city is 33 years old. Approximately 28.1% of the population is under the age of 18 while 12.7% are aged 65 or older. The city also has a large percentage of young adults aged 25-34 (17.7%) and 35-44 (12.5%).
Several private universities provide education opportunities for Tucson residents including the University of Arizona, a top-tier research university, as well as Pima Community College.
Saguaro National Park, the Arizona-Sonora Desert Museum, Reid Park Zoo, and Sabino Canyon are all popular destinations in the area. Additionally, Tucson is known as a hub for festivals such as its All Souls Procession and Winterhaven Festival of Lights.
Tucson has a semi-arid climate, with hot summers and mild winters. The average temperature in July is 93°F while the average temperature in January is 55°F. Rainfall is relatively low throughout the year, with annual precipitation ranging from 10 to 15 inches.
Summary of Tucson Office Space Performance in Q4 2022
The vacancy rate for Tucson office space in Q4 2022 was 10.4%.
The West submarket had the highest vacancy rate at 27.3%, followed by the Southeast submarket at 25.8%. The Downtown submarket had the lowest vacancy rate at 3%.
Net absorption for Tucson office space in 2022 reached 146,000 square feet. In Q4, the Central submarket recorded -134,560 square feet while the Foothills submarket saw positive absorption of 34,726 square feet.
What are office space rents like in Tucson?
The average asking rent for Tucson office space in Q4 2022 across all classes was about $21.80 per square foot.
Class A properties averaged $22.50 per square foot. The Southwest submarket saw the highest average asking rate at $29.34 per square foot.
Purchase & Leasing Activity
Sales volume for Tucson office space in 2022 rose by 3.6% year-over-year from 2021, reaching $177.4 million.
The average sales price per square foot in 2022 was $190, an increase from 2021’s average of $149 per square foot.
Leasing activity in Tucson’s office space market for Q4 2022 occurred across 833,704 square feet of space.
The Central and Foothills submarkets saw the most square footage leased.
Notable Office Space Deals in Tucson in Q4 2022
There were several notable deals that took place for Tuscon’s office space in Q4 2022:
- 6390 Broadway LLC bought 21,920 for $100.37 per square foot.
- Cachita Ltd Ptp bought 14,500 square feet for $165.52 per square foot.
- NP Photonics leased 14,471 square feet of space in the Foothills submarket.
- Centene Management Company, LLC renewed its lease of 26,004 square feet in the West submarket.
These are select examples among other activity.
New Office Space Development Activity in Tucson in Q4 2022
There were 188,705 square feet of office space under construction in Tucson’s market in Q4 2022.
The Southwest submarket accounted for 120,000 square feet of that construction.
North/Oro Valley, Northwest, and Southeast were the only other submarkets where office space construction was taking place in Q4.
Market Forecast for Tuscon’s Office Space Market
Vacancy rates for Tucson office space have gradually continued to increase over the last three years and could continue to do so in 2023 should they follow trending statistics.
While vacancy rates were increasing, leasing activity for Tucson office space still remained lively at the close of 2022.
Absorption and average asking rents are projected to remain steady in 2023.
Takeaways for Office Space Investors
Tucson’s office market saw some challenges towards the end of 2022: Vacancy rates increased and asking rents barely moved.
Yet, some developers may see this low activity as a potential time to invest.
Do your research, stay diligent, and happy investing.
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